In July 2023, Bizcap Au Pty Ltd (Bizcap) lent $70,000 to Sydney CBD Cafe Pty Ltd (the borrower). Mr Duc Dung Vo, the sole director of the borrower, provided a personal guarantee. The borrower operated a restaurant called Edes Restaurant & Bar in the Sydney CBD.
The Commonwealth Bank was joined as a party because it held a registered mortgage over the property.
It was agreed that payments would be made throughout the term of the loan, with a final payment of $93,800 due on 14 December 2023.
If the borrower defaulted, Mr Vo would be liable under the guarantee for all losses suffered by Bizcap. To secure this obligation, Mr Vo granted a security interest over all of his secured property, which included both real and personal property.
Mr Vo also agreed to pay interest and several fees in the event of default.
The borrower failed to make any further payments after the first two monthly instalments of $4,264 were made.
In proceedings before the Supreme Court of New South Wales, Bizcap sought an order for the judicial sale of a property owned by Mr Vo in Carramar (Bizcap Au Pty Ltd v Vo [2025] NSWSC 518).
As at 3 April 2025, the amount owing to Bizcap was $85,571, excluding fees and charges.
It was claimed during the hearing that default interest totalled $53,859.81 as at 3 April 2025. Legal costs claimed were $141,436.39.
His Honour made no finding regarding the permissibility of the legal fees and additional charges but indicated that, if Bizcap wished to claim any amount above the $85,571, it would need to apply to the court and properly prove that the additional amounts were owing.
There was evidence before the court that the property was worth $550,000.
It had been difficult to serve Mr Vo, so orders for substituted service were made. The property was rented, and those parties were served notice of the claim and given an opportunity to assert any rights in the proceedings.
His Honour relied on established law that an equitable mortgage may be created through a loan agreement if the parties demonstrate an intention to create a security interest. If the court is satisfied that an equitable mortgage exists, it has the discretion to order the sale of the property.
In this case, His Honour exercised that discretion and ordered a judicial sale. He considered Mr Vo’s failure to repay the debt, the value of the property, the security held by the Commonwealth Bank, the tenants at the property, and the rights of other parties who had lodged caveats.
His Honour’s orders were comprehensive in facilitating court supervision of the sale of the Carramar property. Bizcap was appointed as an agent of the court and was required to act in relation to the sale in accordance with the duties owed by a mortgagee exercising the power of sale. Orders were also made to protect the position of the Commonwealth Bank and to direct how the proceeds of the sale were to be disbursed.
While it is far easier to recover loan funds when a registered mortgage is held as security, this decision demonstrates that recovery through the sale of property is still possible if the parties have agreed to an equitable mortgage and the court is willing to exercise its discretion to order a judicial sale.